Hi Guys,
Our team has been working on some strategic planning and we were surprised to find a lot of the short sale listings in our area that demanded that the buyer would be responsible for a short sale negotiation fee , attorney fee for the seller's attorney, or some portion thereof.
We would be interested in hearing your thoughts on this model.
Does it discourage offers?
Thanks in advance.
Chris
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Why shouldn't a "negotiator" no matter WHO they are, get paid for negotiating the deal? Do YOU work for free? As long as it is disclosed upfront and on the contract/and or HUD, and buyer agrees to it in writing, so there are no discrepancies...and the short sale is still a good deal, etc...to the buying side? Then what is the problem? No one works for free..... the short sale negotiators ARE negotiating the short sale for all involved to be able to close a deal and sell the home....
The negotiators whether it be a realtor or independent negotiating co. don't get paid half as much as tons of attorney's trying to do this....
What's disgusting is that (at least in LA and Orange Cty areas of Ca) I know several attorney's that are doing this and getting paid MORE than the entire commission of 6% on these deals... really? As if THEY'RE doing ANY MORE work
than a realtor negotiating the sale? Why do u think these attorneys try to convince a seller to go with them instead of an agent??? 1 guy just got paid 7% on a 1 mil deal..because he's an attorney, yet they cut the realtor's commissions to 5%...
I think I just realized what license I'm studying for NEXT...
BRAVO Sheyenne...!!!! could not have stated it better.
@Smitty – You are right I have not done a transaction where the buyer pays a fee. A few agents in my area tried charging the buyer and quit doing it. You are also right, It is not my decision . . . it is the buyer’s decision. I do have a duty to educate my buyer about the pros and cons and all the possible outcomes. I also tell my buyers that a short sale price is a price the listing agent came up with and not the bank’s price. If my buyer gets the home at a super low price, he probably does not care about paying an extra 1%. What happens to my relationship with my buyer if the bank comes back and wants fair market value? You better believe I am going to tell the buyer the good, the bad and the ugly before he signs an offer.
Actually, I would have a harder time explaining the buyer fee to a seller. I would have to tell them that it does discourage offers. Why go there if you don’t have to?
@Teresa Keeler – In my area there are title companies and attorneys that will work a short sale without charging the buyer. They will put a negotiator fee on the HUD and sometimes a lender will pay it and sometimes not. In those cases the title company will still get paid their normal fees to close the transaction.
Chris Black who started this conversation owns Winged Foot Title. He did my son’s short sale and my son did not have to pay extra nor did the buyer. Believe me, Chris worked very hard on that short sale and I am forever grateful. I would do all my transactions with him if he were not located so far away. I had a difficult time getting a buyer to come up to the bank’s price in that transaction. I truly believe my son would have been foreclosed on if we tried to charge a 1% buyer fee.
Hey, no matter how you get there . . . it is all good when we get a short sale closed where the seller avoids a foreclosure and the buyer gets their dream home.
@karen - Again you are not qualified to tell a seller or buyer that a negotiation fee "discourages" the sale esp if you haven't been involved in a transaction where one was charged. So I'm not sure you should be telling a seller anything.
I'm not sure what market you are in but most lenders want FMV for a property. If your offer isn't within a FMV range, it likley won't be accepted. Yes, short sales are good deals in comparison to their non distressed counterparts, but I don't see buyers getting HUGE steels.
Also your title company getting fees on the HUD is STILL a charge to the buyer. It comes out of the proceeds of the sale, but it's still a charge the buyer ends up covering in their offer, so just because it's on the HUD and paid doesn't mean the buyer isn't paying for it.
@ Karen Mathers - In my area (Seattle/Tacoma market) about 50% charge fees and that is not including the Bankruptcy cash fees that are being charged on top of the 1 - 1.5% Those Bankruptcy fees are cash out to the 'Trustee' (what an oxymoron,) cannot be financed and are anywhere from $5,600 - $45,000 in the price ranges I typically work. I don't touch those as I do feel that the Trustee is just 'capturing' a share of something they are not really entitled to and many homeowners are being forced into shortsale by the Trustee. But that is another issue.
In regard to the title/escrow company negotiating these on your behalf and maybe they do or maybe they don't get paid - is just as unfair and predatory in my eyes. Why should that burden be placed on my escrow/title team members and they not be compensated for their time and efforts? They won't be in business long if that happens enough. Businesses need to earn a profit in order to exist.
I believe that as listing agents if we do the work of the negotiating, processing and facilitating of a shortsale, we should absolutely 100% be able to charge and receive a separate fee, especially if we are operating under our own LLC or S-Corp. It is because of these unfair constraints on agents to be able to charge a fair and equitable fee for their time and services that many people are getting 'creative' on the HUD.
I think we can all agree more dishonestly in the wake of all of the greed and dishonesty that has already taken place, is not going to help our industry one bit.
@Smitty - I agree that people should be paid for work performed. If the realtor chooses to use a 3rd party short sale negotiator, then that's his or her decision, not the buyer's. In 99% of short sales, the full commission is paid, not to exceed 6%. I have a 3rd party negotiate my short sales and they get their 1%. They get a half percent from the buyers agent and a half percent from me. I don't think its fair to ask the buyer or anyone else to pay for the listing agent's decision. Here in AZ, realtors are not allowed to charge a dime for negotiating the short sale. They get paid their commission based on real estate sales and that's exactly what their license is for. Their real estate license is not to negotiate short sales for profit. If they choose to negotiate their own short sales without charging extra, then again, that's their decision. I hate it when people suggest that if the buyer wants to buy a house, then they have to pay the 1%. Why should anyone pay for someone else's benefit. If the listing agent wasn't greedy, then all problems are solved with my suggested method and everyone is happy and within the letter of the law, at least in AZ.
Ok, I think I need to clear up some confusion as to how LEGITIMATE 3rd party negotiators work. For sure, the field has been somewhat muddled by the "wild west" mentality that just about anyone can do a short sale these days with zero training. A law or real estate license does not equal short sale knowledge-
1-The SELLER, not the agent hires the negotiator. The agent (or attorney) may refer one in, but the SELLER retains. This means that it now becomes part of the deal, no matter what the agent thinks. This is important, because it establishes Fiduciary Duty with the seller.
2-The negotiators involvement and requirements SHOULD BE DISCLOSED, IN WRITING. The earlier the better. My agents use wording in MLS like "SHort Sale negotiated by professional Loss Mitigator, special addendums and agreements apply"
3-The buyer has to benefit. My philosophy is "I help my seller by helping the buyer buy." This usually translates to a lower offer, better communication, ease of process etc. At the end of the day, if the buyer isn't satisfied, they won't close, and then everyone loses. I have never, ever, had a buyer walk away from a done deal because of my work or moneys owed. All parties are happy or I wouldn't be in business.
www.ssprocessors.com
I don't think anyone questions the ability or knowledge of the good negotiators. I think the question boils down to how they get paid. Since they have no fiduciary duty to the buyer, why is the buyer paying for their services. The more recent short sales in AZ have been coming back at significantly above market value which blows the thought that a buyer gets a better deal and a lower price. I was told directly by a Fannie Mae employee (off the record) that this was a matter of policy. I doubt the buyers would ever consider paying for something extra and not being directly benefited if the inventory was normal, instead of in short supply. BTW, that day is soon coming. The buyer population is starting to shrink as confidence wains so listings will remain on the market longer. Buyers will only select the cream of the crop and probably won't be too anxious to snap up short sales where they have to pay an extra couple thousand dollars to buy.
Who pays for a service has no baring on who the service is being given to. Also it has nothing to do with fiduciary responsibilities. Any party can pay any costs involved in the transaction as long as it is by mutual agreement and is fully disclosed if required by RESPA.
Exactly! Disclose early, disclose often!
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